Overtaxing the Working Family: Uncle Sam and the Childcare Squeeze
Shannon Weeks McCormack*
Today, many working parents are caught in a “childcare squeeze”: while they require two incomes just to make ends meet, they end up spending a strikingly large percentage of their income on childcare so that they can work outside the home. Worse still, some parents find themselves “squeezed out” of the market entirely, unable to earn the additional income their families require because they cannot find jobs that pay enough to offset soaring childcare expenses. This Article argues that the tax laws have played an important role in aggravating these hardships. Currently, the Internal Revenue Code treats the childcare costs incurred by working parents as personal expenses, subject to various dollar limitations, percentage limits, and phaseouts. Once these limitations are applied, working parents will receive tax relief for only a small fraction of the childcare costs they actually incur. This Article shows that this is inappropriate as a matter of fundamental tax policy and results in the overtaxation of the working family. It then provides a blueprint for meaningful reform that would properly treat working childcare costs like other costs of earning income and keep the tax laws from worsening the working family’s economic plight.
*Associate Professor of Law (with tenure), Jack MacDonald Distinguished Scholar 2015–16, University of Washington School of Law. Thank you to Professors Thomas Cobb, Sanne Knudsen, Lisa Manheim, and Kathryn Watts, and the participants of the tax section at the Annual Meeting of the Law and Society Association, Seattle, Washington 2015 for thoughtful comments. Thanks also to Mary Whisner in the Gallagher Law Library and to Talia Butler for their research assistance.